Monday, January 20, 2014

Ed Milliband is right - There must be a 'reckoning' with the criminal banks!

A vast amount of self-righteous indignation is being
spluttered by the banks and their media apologists, over Ed MIlliband's,
frankly rather unremarkable observations, about the need to begin a
re-alignment of our bloated banking sector.

Poor Ed, he is desperately trying to enunciate a sensible
policy direction, in the teeth of a gale of hot air being blown at him by every
Tom, Dick and Boris in the banking sector.

To listen to these people, and their friends in the City
and the Tory party, you would think that everything in the banking garden was
rosy, and that there was no need for any form of change or amendment.

And this is the root of the problem.

The banking industry in the UK has become hijacked by a an
organised criminal fraternity who see the bank sector as their own personal
fiefdom, within which they can manoeuvre to make obscene sums of money, way and
beyond any meaningful relationship to the services they provide or the skills
they possess.

It is not sufficient that they have good jobs and receive
excellent salaries, they demand more and ever more. They view the receipt of
million pound bonuses as literally, 'their due', they then demand double that
figure and they become very exercised when any sensible individual challenges
them and asks "...What do you really do for this return..?"

The fact is that they are nothing more than gamblers.
They play the world's markets with other people's money, and their work is no
more difficult than choosing whether to be on the red or the black.

We do not hold professional gamblers up as paragons of
social virtue, possessing the kind of personal standards that any society needs
if it is going to provide a fair and beneficial environment for all its
citizens, so why do we feel the need to pay any form of obeisance to these
speculators who reside in this moral vacuum?

Why are we not willing to admit that the artificial
values placed upon these institutions are merely theoretical prices engineered
by the casino market in which they reside! Why are we literally held to ransom
by these spivs?

Even when Ed Milliband, the leader of the Labour Party
and a putative future Prime MInister, set out a policy initiative for dealing
with the bloated banking sector, his words had the immediate effect of moving
the financial markets.

A billion pounds was wiped off the value of
taxpayer-owned banks the day after he promised to bring “reckoning” upon
the industry. The taxpayer owns 81 per cent of RBS and 33 per cent of Lloyds.
The institutions were bailed out following the 2008 banking crisis. The drop in
share prices suggests the City believes Mr Miliband has a good chance of
becoming Prime Minister in 2015.

So-called 'business leaders', which is nothing more than
City apologist writer's speak for another bunch of wide-boys and con-artists,
warned Labour’s flagship economic plan to break up the major banks’ dominance
of the high street could end in disaster, while the party’s own shadow business
secretary admitted taxpayers would lose out.

Chuka Umunna, the shadow business secretary, admitted on
BBC Radio 4 the plan to cap the banks’ share of the market to stimulate
competition would “hit” the value of state-owned institutions. Shares in the
Royal Bank of Scotland and Lloyds dived as the Labour leader promised to force
the big five high street lenders to shed branches.

Of course they will lose out, as soon as the speculators
who are busily playing financial games with the share prices of the
publicly-owned banks realise that their games are going to end, they will pull
their money out and the share price will weaken. But that is not a reason for
not acting soon.

"...Experts..." another spiv shibboleth, warned
such a move could trigger a repeat of the doomed attempt by the Co-op to take
over hundreds of Lloyds branches. The bid, overseen by the disgraced Methodist
minister Paul Flowers, pushed the bank to the brink of collapse.

But why should it? Why should the action of a bunch of
flaky gamblers hold the interests of millions of ordinary British people to
ransom. There is nothing intrinsically wrong with requiring more banking
competition on the High Street, although the real problem is that most banks
couldn't care less about retail banking operations any more. In fact for the
big players, retail bank accounts are not a means of making money, which is why
they are so happy to get customers into debt, or screw them with dodgy
products, cheat them with fraudulently offered insurance products, gouge them
with interest rate swaps or any of the other many forms of downright
criminality that they have committed in recent years.

The banking sector in the UK has lost the plot. They do
not serve the interests of British industry any longer, they make it damn near
impossible to get sensible lending to help small business develop, and when
they do lend money to successful businesses, in so many cases they have then
cheated their customers by falsely claiming falls in asset values, or a
plethora of other lies in order to foreclose on the business and to take the
assets over for their own portfolios.

The vast majority of British banking institutions are
literally nothing more than money laundering operations for wealthy foreigners
who for reasons of their own wish to relocate capital from their own countries
and find some nice cosy safe-haven for their money, much of it of very dubious
origin.

These banks will help them achieve their ambitions, and
they will accept any money under any conditions. They routinely ignore the laws
and regulations regarding the need to 'know their customers', they wilfully
avoid engaging with any of the most important checks and balances which help
identify Politically Exposed Persons, for fear that such information would
require them to undertake more expensive regulatory requirements.

Indeed, so brazen are these institutions now that 'regulatory
cost' becomes an excuse for not conforming to the law in the first place, and for
providing an explanation for the absence of competitive business change!

An article in the Daily Telegraph, a leading City
apologist reports;

"... Despite the advent of online banking, this is
an industry which has so far remained largely untouched by the disruptive
powers of the internet. Most other consumer-facing industries are being turned
upside down; but not so banking, where market shares and established names
remain stubbornly entrenched. A few new players are being carved by regulatory
diktat out of the old, but this is basically no more than rearranging the
deckchairs. As Paul Volcker, former chairman of the US Federal Reserve, has
observed, there’s been nothing innovative in banking since the invention of the
ATM.

One of the main reasons for this absence of change is the
cost and demands of regulation, which stand as an almost insurmountable barrier
to entry, deterring even goliaths of the internet age, such as Google, Amazon
and Facebook, from entering the fray. If they think it not worth the candle,
what chance the entrepreneur..?"

Always it is the nonsense talked about the impact of
regulation upon innovation. It is almost as if any form of regulatory
intervention has to be shouted down and its proponents described as being on a
par with drooling imbeciles.

Even Adam Smith recognised the need for
financial regulation. One financial blog reports;

"...Some so-called
“free-market” ideologues, who oppose all regulation whatsoever, should
recognize, as Smith did (he was no ideologue), that the freedom of the market
works best, when protected by laws of justice and when its participants
exercise a high degree of prudence in their conduct before they can ruin it for
everybody else..."

But still the ranters and free market ideologues
continue to downplay the need for financial controls. The Telegraph again;

"...Unfortunately, the politicians haven’t yet got
the message. Instead they remain bound by an increasingly oppressive and
complex regulatory agenda which doesn’t in truth answer any of the concerns it
is meant to address. With just months to go in his role as Europe’s internal
market commissioner, the veteran French politician Michel Barnier has begun
muttering darkly about “unfinished business”. By this, he means another lorry
load of banking regulation, including banning banks from proprietary trading
and dealing with hedge funds. It’s just possible he may get his chance. He’s
yet to announce formally his candidacy for European Commission president, but
it is certainly in his sights..."

The US financial market had the most tightly regulated
financial market for 50 years following the Securities Exchange Act 1934. It enabled
the US to win World War II and created the environment for the ultimate success
of the 'American Dream'. It was badly damaged by the years of greed which followed
and the financial ineptitude of Ronald Regan and George W Bush, neither of whom
should have been allowed within a million miles of a financial market.

Between them they dismantled a structure that had worked
for the protection of the savings of millions of American working and lower
class investors, and instead, gave the proceeds to a small group of criminal
supporters. The impact of that exercise in wholesale fraud was felt in Europe
and the UK as well!

Ed Milliband is right to call for a day of 'reckoning'
with the banks. It is vital that the ordinary British people can begin to
believe that there literally is a way in which we all share the highs and lows
of this era of financial fantasy. It is socially divisive, not to say complicit,
to continue to permit this state of affairs where banks and bankers can
continue to demand bizarre salaries and bonuses for doing virtually nothing for
the benefit of UK and its people, and who simply exist to trouser the proceeds
of their vile behaviour, without a thought for the consequences of their
dishonesty or their crimes.

I am truly sickened by the rampant greed and the bullying
threats that these low-life's exhibit. If you think I am a little hard-edged in
my views, well you would be right. I spent too much of my formative years in
turn as a Fraud Squad detective and later as a Regulator, and then as a lawyer
dealing with City crime, finally as a regulatory consultant, not to have a Baedeker-like
knowledge of these people, their dysfunctional moral status and their
mafia-like mentality.

We the people of this country own two major banks. We own
the bastards because we bailed them out when they were about to collapse, and we
propped them up in the belief that we were doing this for the benefit of the UK.
We kept a lot of idle, spoiled and grossly overpaid layabouts in work, when by
any measure they should have found themselves on the streets, and still, the
Government continues to pay heed to their special pleading and their
overweening arrogant demands for more and more money.

Well, fuck 'em!

Mr Miliband has said that high street lenders would face
a “reckoning” under his Government. He will seek the creation of two new
“sizeable” banks to challenge existing high street lending.

By splitting up these errant institutions and creating a
more competitive industry, Ed Milliband will do a great deal to create a
climate of fairer enterprise and a more just society. Let the whingers whine
and bleat, he cannot do any worse than has already been done, and we need to
see some real basic common or garden fairness being exercised in the way in
which we run our society.

When the ordinary
teacher, health worker, policeman, ambulance driver, fireman or any other
person who truly does perform an important and useful socially-valuable service
starts to see the bankers being brought to heel, and the worst criminals in
their midst being sent to prison, which they richly deserve, then we will begin
to feel that we really are all in austerity together.

This has now become a major electoral issue, and David
Cameron would do better to recognise it, than by hoping he can win votes with
cheap bribes when polling day draws near.

Let me finish with another quote from the Telegraph,
never a paper to want to admit any fault on the part of the fat cats!

"...What ought to be the priority of growth has
taken second place to the pursuit by posse of the wicked bankers. There are
workable alternatives to the present stranglehold of the banks that would both
restore market discipline to lending and deposit-taking, and get rid of the
“too big to fail” problem. But they are perhaps too revolutionary for current
thinking. In any case, almost anything is better than the never-ending drip
feed of populist nonsense that passes for today’s financial reform agenda...".

As always, the regulatory model is dismissed as 'populist
nonsense'. Such brave words no doubt play well to an audience of bankers and
other spivs, but try telling that to the vast majority of decent people whom
the banks have failed, defrauded, ripped off, gouged and cruelly damaged, and
see if they would not rather prefer a little more regulation and a little less
'laissez faire'!

"We own the bastards because we bailed them out when they were about to collapse." Alas, the " the vast majority of decent people whom the banks have failed, defrauded, ripped off, gouged and cruelly damaged" did not demand nationalization, and the banks are as prepared to demand bailouts in the future as they were in 2008.

Rowan, well said but I'm curious as to why you say that the destruction of the reasonably well run U.S. financial system should be laid at the feet of Reagan and Bush. It might seem that they would be the right choices but I don't think the banking system changed much in their administrations. Hell, thousands of bankers went to jail at the end of the Reagan administration and in the Bush administration as part of the S&L cleanup. Glass Steagall was eliminated under Clinton. The advent of derivatives and failure to do anything to keep them in check started under Clinton (and accelerated under Bush and Obama). The whole concept of "Too Big to Fail" really took off at the end of Clinton's regime with the Long Term Capital Management bailout.

Another terrible thing for the U.S. financial system, though this really can't be attributed to any political regime, was the conversion of the big investment banks, like Goldman Sachs, from partnerships to publicly traded companies. This happened from the late 80's through to about 2000. As partnerships they wouldn't take dumb risks because it was THEIR money. As publicly traded companies they don't care if the company's bets, er, investments cause it to fail 3 years down the road. They'll be gone by then and have cashed out their stock options.

As ever Rowan, you are keen to highlight the wonderful depths both Wall Street and the City of London have plunged too over the course of a generation. Suffice to say, and following on from Rough Carrington's remarks, its correct to say that the rot set in a little earlier than the Reagan/Thatcher era. Indeed, it was President Jimmy Carter who first began to meddle with the financial reforms of Roosevelt enacted during the Depression in the States, it was Richard Nixon who scuttled what remained of the post WWII Bretton Woods arrangements, and it was Ted Heath in his 1970-1974 administration in the UK who first began to deregulate our own financial services sector by allowing high street banks to compete with Building Societies in offering mortgages.

These timelines are important though, because they coincide with the hijacking of international financial oversight bodies by the followers/adherents of Hayek, Friedman and Ayn Rand - Alan Greenspan being one of these "neoliberal" lunatics - better known as the "Chicago Boy's".

As for criminality, and debauchery, one need look no further than the great work being undertaken by William Black in this field - Pity they don't make them like Black anymore,but greed is a strong motivator and the only language our friends in the City will ever understand is "JAIL TIME", and having their assets treated the way we treat drug dealers assets.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!